Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 292

5 common mistakes in running an SMSF

There are a lot of rules and regulations when it comes to superannuation and running your SMSF. Fund investments are for the sole purpose of providing benefits for the members or their dependants for superannuation purposes and not for personal reasons. Here are some common mistakes and how you can avoid them.

1. Don’t use your SMSF money for personal reasons

Some people take money from their SMSF accounts and pay personal or business expenses to help themselves or a close friend or relative. Sometimes they do so inadvertently, and in other cases, they do not realise it is not allowed.

It is essential that everyone separates their personal and business bank accounts from their SMSF accounts. Taking money from superannuation before the correct time can result in severe penalties to the fund as well as the member. If an amount is withdrawn in breach of the rules, it should be repaid as soon as possible. Frequent breaches may result in a person being disqualified from running an SMSF and include financial penalties.

2. Investments not in the fund’s name

Make sure SMSF investments are not mixed with personal investments. A requirement of superannuation law is that the assets of a fund must be in the name of the individual trustees or the corporate trustee. If this is not possible, supporting documentation that demonstrates the asset belongs to the fund, such as declarations of trust or trustee minutes, should be maintained. If a member becomes bankrupt, investments in the name of the fund are protected from the member’s creditors in most cases. Being well organised will ensure the investments are in the right name.

3. Stick to the investment rules

It is possible for an SMSF to invest in a wide range of investments including term deposits, shares, property and cash.

However, it is essential to make sure the fund obeys the many rules applying to investments. Most of these rules apply where a person, company or trust has a significant link with the fund. This includes members, trustees, any of their relatives and companies or trusts they control. If the fund makes a loan, invests in or leases assets to a related party, penalties may apply, and the fund could lose its tax concessions.

Any assets or money belonging to the fund must not be used for personal or business purposes unless it is specifically allowed by the superannuation law. For example, it is possible for the fund to lease commercial property to related parties providing it is on a commercial basis and permitted by the fund’s investment strategy. The money in the fund is never to be used as a source of cheap finance and cannot be used for emergencies.

Complying with the investment rules requires some planning and monitoring of the SMSF on an ongoing basis, especially when the values of investments change or related parties are involved.

4. Pay at least the minimum pension

The minimum amount of pension must be paid or there can be problems for anyone in retirement phase or receiving a transition-to-retirement pension. It can mean unnecessary tax in the fund and compliance issues. One of the benefits of superannuation is access to tax concessions so why not maximise that opportunity.

Strict rules apply to pensions, when income earned on assets that support retirement phase pensions is tax-free. Not maintaining pensions properly may result in the loss of benefits and then paying tax on those earnings within the fund.

Sometimes unexpected errors can occur, resulting in small underpayments of the pension. It is possible to make a catch-up payment to get things back on track and not impact on tax concessions. Prevention is better than cure and arrangements should be made to ensure the minimum amount will be paid automatically before 30 June.

5. Store documents properly

Keeping the documents of the fund such as the trust deed, minutes of meetings and decisions, investment information, membership and trustee acceptances is essential for compliance, audit and when the trustees of the fund may be brought to account. Loss of any documents may result in an unsatisfactory outcome as disputes may arise between the trustees, members and others making a claim on a fund benefit.

Records that are required to be kept for five years are:

  • accounting records that provide accurate information about the transactions and financial position of the fund
  • the annual operating statements and the annual statements of the fund’s financial position
  • copies of all SMSF annual returns lodged with the ATO
  • copies of any other statements lodged with the ATO or provided to other super funds

Records that are required to be kept for 10 years are:

  • trustee minutes of meetings and decisions on matters affecting the fund
  • records of changes to trustees, and a member’s written consent to be appointed as a trustee
  • trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007
  • copies of all reports given to members
  • documented decisions about storage of collectibles and personal use assets

 

Graeme Colley is the Executive Manager, SMSF Technical and Private Wealth at SuperConcepts, a sponsor of Cuffelinks. This article is for general information only and does not consider any individual’s investment objectives.

For more articles and papers from SuperConcepts, please click here.

 

RELATED ARTICLES

Navigating SMSF property compliance

Meg on SMSFs: Where are the risks in our major super sectors?

The mechanics of the $3 million super tax must be fixed

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.